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Obama Administration issues new rules for offshore drilling

15 April 2016

On April 14, the Obama Administration released what it called "the most significant safety and environmental protection reforms the Interior Department has undertaken since Deepwater Horizon." In April 2010, a blowout on BP’s Macondo well destroyed the Deepwater Horizon drilling rig, killing 11 rig workers and spewing millions of gallons of oil into the Gulf of Mexico.

The rule changes come six years after the Deepwater Horizon disaster - Image: USCG
The rule changes come six years after the Deepwater Horizon disaster - Image: USCG

Six years later, the new rules from the Interior Department include requirements for the design of well components as well as monitoring and inspection. Several of the new rules cover blowout preventers (BOPs), devices that seal off a well in case of emergency and prevent an uncontrolled leak.  A BOP failure contributed to the Deepwater Horizon disaster.

The Interior Department now requires that BOPs be designed to avoid certain weaknesses, and be broken down and inspected every five years. The rules also set out standards called 'safe drilling margins' for the design, casing, cementing and other work that goes into drilling a well."

A statement from the Interior Department said the changes are designed to protect both workers' lives and the environment. The Bureau of Safety and Environmental Enforcement (BSEE), said that the rules were based on existing best practices being used in the industry.

Bloomberg said oil companies had asked for more flexibility during the consultation period, claiming that almost two thirds of the wells drilled in the Gulf of Mexico since 2010 would not meet the proposed requirements. In more than a dozen meetings with Obama administration officials in March, energy companies and their allies insisted that they needed assurance they could swiftly deviate from the drilling margin standards without waiting for approval from regulators.

The final rules responded to some industry concerns, including by giving oil and gas companies more discretion on the timing of equipment tests, according to an unnamed Bloomberg source.

The Interior Department said industry would face higher costs complying with the rules, including one-time charges associated with adding new equipment to existing rigs. Over 10 years, the proposed version of the rule would cost about $883 million, the government estimated, but that would be offset by benefits, such as averted oil spills, valued at as much as $5.3 billion.

This was disputed by the American Petroleum Institute, which published a report last year saying the proposed changes would impose new costs of $31.8 billion over the next decade. A separate assessment by Wood Mackenzie for the Gulf Economic Survival Team, a Louisiana-based business group, concluded the rules would cut exploratory drilling in half.

A report in the Times-Picayune said Louisiana Republicans claimed the new rules would strangle the struggling oil and gas industry. The newspaper quoted Rep. Garrett Graves, R-Baton Rouge, as saying: "We all support the safety of our workers and the environment, but this is no more than a thinly-veiled attempt by the Obama Administration to kill our domestic energy industry. This is why America hates our federal government.”

But the US Chemical Safety Board said the new rules did not go far enough and there were still too many risks offshore. In a draft report issued on April 13, the independent federal agency said the new rules “do not go far enough to ensure effective industry management and control of major hazards or prevent possible future Macondo-type incidents.”

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